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Allstate Homeowners Insurance Claims Department – Allstate will raise auto insurance rates at a faster rate through the end of 2022 as the company deals with entrenched higher claims costs, the airline’s CEO said during the Barclays Global Financial Services conference last month.

CEO Tom Wilson also briefly addressed labor rates, reporting that rival State Farm “just raised rates by $6 an hour nationwide. We don’t do it that way. We do it market by market, supplier by supplier, so that puts some pressure [on costs].”

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Severity factors such as used vehicle costs and parts and labor cost inflation have increased significantly and are not expected to decrease, Wilson said. “The real trick will be how long will inflation continue? Used car prices seem to have leveled off, but labor and parts costs have not, as automakers are still trying to catch up and raise OEM parts prices.”

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Allstate began filing auto insurance rate claims late last year, raising its rates 10% beginning in the fourth quarter of 2021. In August, Allstate said it implemented a 14.5% rate increase at eight locations, resulting in an overall premium effect of 3.2%. Since the beginning of 2022, the carrier has implemented 72 fare increases, averaging approximately 10.3% in 51 regions.

In addition to raising rates, Wilson outlined three other ways to improve profitability: imposing underwriting restrictions in inefficient markets, further cutting costs and changing claims practices to combat high inflation.

He said the pandemic created “all kinds of volatility” in the P&C insurance industry, which “significantly increased profitability in 2020.” And this is “despite the fact that we have recovered more than a billion dollars for our clients… We have led the industry by being customer-centric.”

“Losses are increasing, so you need to raise prices. And we did it,” Wilson said in response to a question from Barclays insurance analyst Tracy Dolin-Benguigi.

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Although used car prices are falling, “we’re not going back to where we were before because it’s built into the system. People buy cars; they get loans for cars. Nobody wants prices to drop 40% and then return to their previous levels. It won’t happen.”

“So you do things differently. And we undertook larger, faster price increases,” he said, outlining the first of several strategies Allstate has implemented to return its combined ratio to 105 in the first half of 2022, well into the mid-90s. where it was before the pandemic.

Raising rates is a higher priority for the company than expanding its customer base, he said. “When we decide whether to raise prices, we raise them. We don’t moderate it because we want to continue to grow,” Wilson said. “What’s interesting is that despite this, we’re still doing quite well with growth, which just suggests that the environment has become a little more volatile.”

Customers “seem to agree” with the company’s “very aggressive price increases,” he added, relaying information he received from a group of agents a couple of weeks ago. “I’m not saying they’re happy for us to call and say we’re increasing their rate by 15%. But they’re like, “Yeah, my house is worth more, and my car is worth more.” Everything else is going up, food is going up, gasoline is going up.” So they’re not shocked. So if you look at our retention levels and the impact of that on growth, we find that we are outperforming our retention numbers given the size of our pricing.”

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During the question-and-answer session, Wilson floated a theory about adding automatic adjustments to auto policies, like the company did with property value for property insurance.

“If we had these auto insurance prices for used cars, our prices would automatically go up,” he said. “We didn’t do that. Nobody does. It’s kind of a one-time thing.

“So we’re thinking, how do we build these automatic bidding mechanisms into auto insurance? And what will we do with home insurance,” he added. “I’m more interested in home insurance because it’s a 12-month policy. It takes longer to receive money.”

In addition to the rate actions, Allstate is introducing more restrictive measures to underwrite new business in places where it can’t achieve adequate rates. One such example is California, where the Department of Insurance (CDI) has taken no action on the growing number of rate filings.

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“California is in a tough situation, they haven’t improved any [rate documentation]—I think it’s been 29 months,” Wilson said. “We have had a commercial application for several years. We thought we had a deal with the homeowners, but we don’t do it anymore. So we’re in a situation where we expect not much to change in the near future… I think the California market is going to become increasingly volatile.”

He added that each market should stand on its own. “Our goal is that every line, every state, almost every year must complete the job. So we don’t believe in cross-subsidizing cars and houses, California and New York, or New York and Florida,” he said. “Everyone has to live on their own because we’re trying to keep subsidizing clients to a minimum.”

In California, Allstate increased down payment requirements to 50% to prohibit the sale of new policies. “We are looking at a range of measures to help fix profitability in this state. So I think you would expect there would be fewer of us in this state,” Wilson said. “That’s 12% of our premiums in the auto business. But we’re fine with that as long as we don’t grow in California. We can’t give away our money.”

He said Allstate recently filed to raise California’s auto insurance rate by 6.9%, “the most you can get without going to a hearing… We need more than 6.9, [but] we won’t get 6.9 . They told everyone that you can send them whatever you want, but they don’t look at it. So we are not going to wait, and hope is not a strategy.”

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Overall, the airline is working to counteract inflation by “using analytics, using scaling processes [and] redesign,” he said. “We have strategic partnerships with a number of parts suppliers where we buy at discount prices [and] with repair shops,” he said, and “we use predictive modeling to decide whether we should repair or replace that vehicle” on claims. collisions.

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We give Allstate auto insurance a rating of 8.8 out of 10.0 for its wide range of coverage options and many driver discount options.

As the fourth largest auto insurance provider in the country, Allstate offers coverage to a wide range of drivers and homeowners. But what do Allstate insurer reviews say about the company?

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